By Teresa Riordan

Published: November 28, 1994

WASHINGTON—
IN a ruling that is expected to establish an important precedent for the biotechnology industry, the nation's highest patent court last week rejected a bid by two companies to sell a cheaper generic version of the potent AIDS drug AZT.

The ruling by the United States Court of Appeals for the Federal Circuit appears to put to rest the long tussle between the Burroughs-Wellcome Company and the National Institutes of Health over who should be given credit for developing AZT.

The Federal Circuit affirmed a lower-court finding that Burroughs-Wellcome scientists were correctly named as the only scientists on five of six patents. The court did not take a position on who should be named the rightful inventor to the sixth patent but said that full evidence on that issue should be heard at a trial court proceeding.

"When someone shoots six bullets and five of them hit you're in trouble" said Charles E. Lipsey a partner at the law firm of Finnegan, Henderson, Farabow, Garrett & Dunner. "It's a pretty thorough victory for Burroughs-Wellcome."

Barr Laboratories Inc. and Novopharm Ltd. had contended that two N.I.H. scientists also deserved to be named as inventors and that the Government thus had the right to license AZT rights for generic manufacture of the drug.

Bruce L. Downey, chairman of Barr Laboratories, issued a statement calling the ruling "particularly disappointing" because the Food and Drug Administration recently completed a preapproval inspection for a generic version of the drug. "Once F.D.A. approval is received only the patents will stand in our way of launching a lower-cost generic version of this critical AIDS therapy," Mr. Downey said.

The Burroughs-Wellcome patents appear to insure the company of a monopoly on AZT until the year 2005. The cost of AZT for an average patient is about $3,000 a year, and the drug earned Burroughs-Wellcome $379 million in the company's 1993 fiscal year, the most recent figure available.

In its ruling, the Federal Circuit clarified a persistently murky question in biotechnology discoveries: What exactly qualifies someone to be an inventor?

In the AZT case, Barr and Novopharm contended that Burroughs-Welcome scientists, although they isolated the compound first, had no idea it could work until two N.I.H. scientists assessed its therapeutic potential with a test-tube experiment they had developed.

"The court said that in the ordinary case the invention is made when it's first conceived" said Ned A. Israelson of the San Diego law firm Knobbe, Martens, Olson & Bear. "That's a relief to me as a biotech attorney. It means we don't have to go through a lot of confirmatory testing before we know who the investors are." A Tiny Automatic Dialing Device

Peter D. Feldman got the idea for a pocket-size automatic telephone dialing device when someone stole his mother's calling-card number by looking over her shoulder as she made a call from a public telephone at Laguardia Airport in New York.

"By the time she landed in Los Angeles someone had charged a couple of thousand dollars' worth of phone calls to China," he recalled.

Mr. Feldman, a product manager at the Interactive Telephone Company in Hackensack, N.J., developed a device the size of a credit card that can be programmed with several different calling-card or credit card numbers as well as their personal identification numbers.

Mr. Feldman said he had developed several prototypes of the card. In one version the face of the card features a miniature keypad, similar to that on a calculator, that can be used to program different numbers into the device. Imbedded into the same side of the card is a tiny speaker that can be pressed up to the receiver of a phone.

When a certain button or buttons are activated on the card, the speaker replays the sounds that a touch-tone telephone would normally emit when a given number is dialed.

Although Mr. Feldman originally conceived of his idea as a security measure, he contends that his invention is more convenient than so-called smart cards, which are inserted into specially equipped telephones that automatically deduct the cost of the call from the prepaid card.

"The telephone has to have a device that can read a smart card and not many telephones do" Mr. Feldman said. "My device can be used with any phone -- even a rotary."